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05-01-2012, 11:55 AM #1
Barnes & Noble, Microsoft in e-book venture
An infusion of money from Microsoft Corp . sent Barnes & Noble Inc.'s stock zooming on Monday, as the software giant established a way to get back into the e-books business.
The two companies are teaming up to create a subsidiary for Barnes & Noble's e-book and college textbook businesses, with Microsoft paying $300 million for a minority stake.
Shares of Barnes & Noble jumped $10.41, or 76 per cent, to $24.09 in morning trading. The opening price of $26 was a three-year high. Microsoft's stock rose 2 cents to $32.
The deal gives Barnes & Noble ammunition to fend off shareholders who have agitated for a sale of the Nook e-book business or the whole company, but the companies said Monday that they are exploring separating the subsidiary, provisionally dubbed "Newco," entirely from Barnes & Noble. That could mean a stock offering, sale or other deal.
The deal puts to rest concerns that Barnes & Noble doesn't have the capital to compete in the e-book business with market leader Amazon.com Inc. and its Kindle, said analyst David Strasser at Janney Capital.
For Microsoft, the investment means that it will own 17.6 per cent in a company that sells tablet computers based on Google Inc.'s Android, one of the main competitors of Windows Phone 7, Microsoft's smartphone software.
Microsoft also said the deal means that there will be a Nook application for Windows 8 tablets, set to be released this fall. The app is likely to get a favored position on Windows 8 screens.
There's already a Nook application for Windows PCs, but none for Windows phones.